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Container Ports – Key Sector Trends

Container Ports – Key Sector Trends. 21 st June 2010. Saurabh Suneja Tel: +91 11 42505163 (D), +91 11 26930117, +91 9910400494(M), +91 11 26842213 (fax) Email: ssuneja@crisil.com. This presentation. Trends: Indian ports, container traffic growth and drivers

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Container Ports – Key Sector Trends

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  1. Container Ports – Key Sector Trends 21st June 2010 Saurabh Suneja Tel: +91 11 42505163 (D), +91 11 26930117, +91 9910400494(M), +91 11 26842213 (fax) Email: ssuneja@crisil.com

  2. This presentation • Trends: Indian ports, container traffic growth and drivers • Capacity outlook: things are looking up • Constraints: old; more pressing; and some emerging caution points

  3. Traffic Snapshot (2009-10) Port Traffic grew at 10% between 2004-05 and 2009-10 Traffic at non-major ports grew at by ~7.9% for major ports ~ 14.2% Commodities: dominant share of POL, followed by IO, containers and Coal Growth in major and non-major port traffic since 2004-05 driven by Containers (@ 15.8%), PO Traffic growth for major and non-major @ 13% between FY 09 and FY 10 Capacity utilization levels peaking for major ports: ~95% Minor ports utilization at 68% Traffic growth POL Iron Ore

  4. Container traffic: Recent volatility, but strong growth fundamentals Quarter wise container traffic (MT) • Recent volatility: Low / flat container traffic in 2009, Q1 2010 • Growth fundamentals continue to remain robust • Growth in merchandise trade (WB expects merchandise exports to grow @ 20% and 17% for FY 11 & FY 12 respectively) • Growth in containerisation

  5. Container traffic: strong outlook Expected container traffic growth (MT) 11.2% • Expected growth @ 11.2% CAGR to 195 MT by 2014-15 • Although growth not as high as in the past 5 years • Commodity drivers: • Imports: capital goods (driven my infrastructure growth) • Exports: Textiles and food grains

  6. Recent developments – select projects • Recent capacities added to minor ports • Dominated by bulk capacities on the east coast Select recent projects and expected dominant commodities Gangavaram: Coal +, 2008 Jaigarh: Bulk (coal +), Gen, Container Krishnapatnam: Coal, IO, 2008 Karaikal: Coal +, 2008

  7. Huge capacities planned for non-major, major ports

  8. Select upcoming projects - large capacity expansions • Large capacity expansions underway: projected addition ~ 700 MT (*as of July 09) • Expected both for major and minor ports • Key drivers: Container demand, coal imports for power gen • LNG capacities expected in western ports on the back of improved gas grid • Confidence wrt. projects coming up • Projects at major ports are at advanced stages of development • Many minor ports projects at existing ports and capable developers Mundra: Coal; SPM Dhamra: Coal + Dahej: LNG jetty Mum: Offshore cont. (Gammon +) Paradip: Award of IO and coal terminals JNPT: 4th cont. term. Dighi: Coal & cont. Krishnapatnam: Phase 2 exp M’goa: Coal & IO Ennore: Coal terminal Valarpadam: Cont. - dev. by DP World Chennai: 2nd cont. terminal (PSA Sical) CONTAINERS BULK

  9. Select upcoming projects – PPPAC approval Container projects in major ports – recent PPPAC approval obtained Paradip: Multipurpose to handle cargo & containers JNPT: Standalone Cont. Handling New Mangalore: Container terminal Chennai: Mega Container Terminal Tuticorin: North cargo berth II

  10. Outlook: Project flow expected to look up • Investments have been already happening on minor ports • Strong minor ports capacities in Gujarat; AP and Orissa are catching up • Projects flow for major ports has been subdued for various administrative reasons • Delay in finalization of new MCA • Time taken for clearing tariffs for new projects as per 2008 TAMP guidelines • But projects flow is looking up • Projects under process: JNPT 4 under bidding, Chennai mega container terminal, Tuticorin berth No. 8 • The PPPAC approved 8 projects during Oct 08 – Nov 09 with expected project costs of INR ~ 11 thousand crores • 4 projects for INR 4,179 crores under consideration

  11. Non-major ports: growth in share to continue • Consistent growth in market share: Traffic share grew from around 27% in 2005-06 to ~ 32% for 2009-10; 11.5% share of non-major ports in container traffic • Majority of recent capacities in non-major ports • Rise in expected share beats past forecasts Share in traffic expected to grow to 42.2% for 2013-14 Expected share in Capacity at 36% as per 11th Plan Major Ports Non-Major Ports

  12. Capacity utilizations to ease • Overall utilization levels would come down from the present ~85% to ~73% Current and expected capacity utilizations

  13. Minor ports to gain share in container traffic Container traffic – expected growth (MT) • Container traffic at non-major ports projected to grow @ 27% against 10.5% at major ports • Growth in traffic at non-major ports in line with available free capacity – container capacities coming up at the non-major ports of Pipavav, Hazira, and Dighi will drive higher growth / share

  14. Issues • Container ports efficiency: Many old constraints remain • Issues related to mechanisation have been largely resolved in cases of large privately operated terminals • Congestion issues remain due to very high capacity utilisation (e.g. JNPT) • Lingering constraints of: Shallow draft at major ports, poor hinterland connectivity • Delay in development of many announced projects • delays in environmental clearance, problems with financial closure • Bringing bankable projects to market still the biggest hurdle • Reliance on private investment for capacity ports dev. is huge: ~USD 14 Bn • Poor project preparation, unattractive packaging lead to delays at procurement and post award stages • Some minor port projects have highlighted systematic gaps in site selection: environmental issues, unfavorable soil conditions etc. • Administrative, policy change issues

  15. Concerns / Caution points (Observations from recent projects) • Concerns over traffic • Merchandise trade growth dependent on health of global economy – not out of the woods yet • Key concern for new projects, difficult financial closures for borderline projects • Differential royalty structure in minor ports adversely impacts the economics of new port developments • Operational ports already have a first mover advantage • May delay investments / reduce competitive position of newer developments • Are recent bids too aggressive?

  16. Summary • Traffic flow has started to look up after a brief depression • Growth fundamentals remain strong • Trends from traffic and capacity addition expectations • Trend towards minor ports gaining market share will continue • Capacity utilisations shall ease, balance in favour of minor ports • Sector is poised for growth and investments • Healthy pipeline of under development, awarded, and approved projects • Many minor ports are sitting on potential for capacity ramp up and have robust development plans, major ports projects flow will go up • But hinterland connectivity constraints and some other issues will need to be managed

  17. CRISIL Risk and Infrastructure Solutions Limited A Subsidiary of CRISIL Limited, a Standard & Poor’s company www.crisil.com

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